China introduced the preferential policy on individual income tax (IIT) subsidy for overseas professionals and talents working in nine cities in Guangdong in 2019. The first round of IIT subsidy applications to access those subsidies has started this month.
As each city formulates the implementation rules based on local conditions – the rules may vary slightly from city to city in aspect of the identification of ‘high-end’ talents and of talents in ‘short supply’ and the application procedure. Here, we summarize key information for your reference.
Generally, to calculate the amount of subsidy, the formula is: The subsidy amount = the amount of IIT paid in nine cities in 2019 – taxable income × 15% Specifically, under the IIT subsidy policy, the taxable income includes the following sub-items:
The subsidies will be calculated based on the above taxable individual income sub-items separately and will then be distributed on a lump-sum basis next year. Thus, the calculation formula of subsidy amount can be extended as:
The subsidy amount =∑ [(the amount of IIT paid in sub-items in nine cities in 2019 – taxable income in sub-items × 15%)]
To clarify the IIT payment of overseas talents (including “HKMT residents”), you can refer to our guide on China’s IIT rules to understand rules on foreign workers’ tax residency in China and the IIT calculation methods, or refer to the government’s original documents – the Announcement on the Criteria for Determining the Residence Time of Individuals without Domicile in China (MOF STA Announcement  No.34) and the Announcement on Individual Income Tax Policies for Non-resident Individuals and Non-domiciled Resident Individuals (MOF STA Announcement  No.35).
To apply for the subsidies, eligible talents must fall under the following scope:
Individuals or the employer of the talents can both file the application to relevant government departments. Where the IIT of the overseas talent is withheld and paid by a withholding agent, the withholding agent can apply for subsidies on behalf of the overseas talent. If the individual income tax is declared by the taxpayer himself or herself, the application can be filed by the taxpayer.
In Shenzhen, the subsidy application can be submitted by individuals after being examined and approved by the enterprises where the individual works for. Application from individuals providing independent personal services will not need to be approved by the employer.
The subsidies will be directly allocated to the domestic personal bank account designated by the eligible talent. To ensure timely access to the subsidies, it is recommended that enterprises and eligible individuals make appropriate preparations and file applications as soon as possible according to the implementation measures and actual conditions issued by their cities. Employers can evaluate the feasibility of applying for the subsidy for their employees and start planning their staff assignment in the GBA cities for the future.
You are welcome to contact our GBA-based professionals for assistance in foreigners’ IIT calculation, subsidy application, and derive practical solutions on human resource arrangement in GBA. Please email us at China@dezshira.com.
About Us China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org. We also maintain offices assisting foreign investors in Vietnam, Indonesia, Singapore, The Philippines, Malaysia, Thailand, United States, and Italy, in addition to our practices in India and Russia and our trade research facilities along the Belt & Road Initiative.
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